Sunday night the futures were sloppy, not horrendous, just sloppy. This morning they were ugly, Dow -140 (+25 fair value) with similar action in the other indexes. By the time I had my coffee it looked like all was forgiven. We did have a pretty hard fade just after the open but it never really could get going. We sold our QQQ puts via text for a nice gain and the first half of the FB calls we bought in the market letter at the 100% Up Rule. A bit later we sold the 2nd half of the FB and the old position in the GLD, since they both expire Friday. We replaced them all on a pullback with GLD and FB that expire 9/23. All in all it was a good day…
Today’s market action was typical of the dramatic oversold nature of what we went through on Friday. As I mentioned this weekend, the adv/dec and vol were extreme. At 3:00 PM they were both 20:1, however, at the close the volume expanded by 30% on the day and the final was 30:1. Today’s move lower at the open without “massive” follow-thru, and a rally to close at or near the highs means we should test the breakdown in the neighborhood of 2185-2190 S&P and 18550 DJIA. These are not outlandish moves, but since we are long lower (FB calls @ 1.38 now 1.56, GLD@ .83 now $1.05) a move higher is a nice gain. This is not to say we can’t go higher, just that we need to see how things act at those higher levels.
Based on cycles, this tends to be an up week, but the Hillary health news giving Trump a boost might throw a wrench into the markets love of the status quo. If we do continue higher, some managers might cheat a little on the S&P rebalance due at the end of the week and be buyers of the under-weighted names.
Last week I said I’d add some trades to this note, so here’s the first:
Buy SSYS @ mkt. This 3D printer company has been consolidating and is bouncing off the lower Bollinger Band, for the very short term I would use last week’s low of $20.87 as a sell stop. Unfortunately the options have no liquidity. CAM
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